Bamboozled: A lesson in economics

Parents often labor to get their kids to read more. So when TD Bank offered a summer reading program with financial incentives for school-age children — 10 bucks for 10 books — Joan Emmer and her 8-year-old son, Scott, signed on.

Scott was thrilled at the prospect of getting reward money for reading, his mother said, and he quickly read 10 books.

“It was a great experience for him to go into the bank and open the account, knowing that his hard work had paid off,” said Emmer, who lives in Edison.

Imagine the family’s surprise when they received a year-end statement for the account with a balance of zero.

“His $10 account had been eaten up by ‘Cycle Service Charges’ of $4 per month for each of the months of October, November and December. In fact, I believe he even owes the bank some money!” Emmer said. “I think my 8-year-old has just had his first lesson in economics.”

That’s when they contacted Bamboozled.

Turns out the account charges were an error. Scott’s account was mistakenly entered into TD Bank’s computer as a checking account instead of a young saver’s account.

Spokeswoman Lauren McClintock said the error was corrected and the money was returned to the account, which has no fees and no minimum balance requirements.

“We’re giving them an extra $10 in the account to apologize for the error,” McClintock said.

Kudos to TD Bank for making the fix, and also for offering young people a fee-free bank experience. And it has kept a customer: Scott wants to participate in the program again next summer.

FEWER FEES, PLEASE

While the Emmer’s account is without fees, there are plenty of other banks that sock it to consumers, nickeling and diming them at every turn.

For the past 10 years, fees have trended higher, according to Bankrate.com’s annual survey of banking fees, and senior financial analyst Greg McBride expects to see similar upward trends for the next 10 years.

“The fees are completely avoidable, and in tough economic times, avoiding fees is really the low-hanging fruit when it comes to getting the most out of your finances,” he said.

Here are some ways you can lower your banking costs.

Monitor your account online: You can know your balance any time of the day or night and you’ll see if deposits or checks have cleared.

Avoid bounced-check fees: Link your checking account to your savings account. If there’s not enough in your checking account to pay a check that comes in, funds will be transferred from savings to checking to cover the difference. “It’s a low-cost line of defense in the event you slip up,” McBride said.

Reduce ATM fees: Use only your bank’s ATMs so you won’t be charged a fee. Carry the cash you need, or if you’re traveling, check your bank’s website for local ATMs so you can avoid other ATMs, which probably charge fees. (The Bankrate.com survey found fees averaged $2.91 a pop.) Or use your debit card (for a PIN transaction) and get cash back. Paying an occasional ATM fee won’t bankrupt you, but a $2 ATM twice a week for a year costs $208 annually to access your own money.

If you have a fee-heavy bank account, you may find your bank offers a no-fee version. Or shop around.

“People spend six hours a day on Facebook but they don’t spend 10 minutes to look at their account,” McBride said.

CHECK THOSE RETURN POLICIES

A reader thought she was Bamboozled when she used a debit card to purchase a prom dress for her daughter. The dress didn’t fit, so she returned it the next day. The clerk said it would take up to 14 days for the reader’s checking account to be credited with the return.

“I would like to take my daughter to purchase another dress and I do not have the money,” she wrote. “Is this fair to the consumer that paid cash for a dress to wait 14 days for their money?”

It may not seem fair, but the store wasn’t wrong because the reader used her debit card like a credit card.

Some debit card purchases require a PIN number at the point-of-sale, and those purchases are treated like cash. Other debit purchases are treated like credit card transactions and you sign for the purchase. These are called signature debits. The two types of transactions are cleared through different networks, so returns are processed differently.

Refunds on signature debits aren’t processed as quickly as PIN debits. If this reader used a PIN, the money probably would have been back in her account in 24 hours, according to the American Bankers Association.

Still, a PIN transaction isn’t always the way to go. Purchases made via signature debit may offer more protections than PIN debits, so ask your card issuer about your card. The next time a clerk asks “debit or credit?” you’ll be able to make an educated choice.